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Operations Research: The Science of Better. What we do. Our accomplishments Our mission Our expertise Our scope Our approach Our services. Our accomplishments. [name of client/organization] [business problem] [O.R. solution] [value we delivered]. Our mission.

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what we do
What we do
  • Our accomplishments
  • Our mission
  • Our expertise
  • Our scope
  • Our approach
  • Our services

Operations Research

our accomplishments
Our accomplishments
  • [name of client/organization]
  • [business problem]
  • [O.R. solution]
  • [value we delivered]

Operations Research

our mission
Our mission
  • Help you with the challenge of making complex decisions by:
    • Performing quantitative analysis that provides insight
    • Providing sensible options and recommending courses of action
    • Reducing risk
    • Improving the quality of recurring decisions

Operations Research

our mission con t
Our mission (con’t)
  • Have a dramatic, positive impact on a project’s or organization’s value

Operations Research

our expertise
Our expertise
  • Business consulting
  • Modeling & analysis
    • Math modeling, simulation, decision support, data mining, optimization, revenue management, supply chain management, logistics, strategical analysis
  • Technical support, training

Operations Research

our scope
Our scope
  • Serving any organizational unit, any function, any geographic area
  • Assistance from strategy through execution

Operations Research

our approach
Our approach
  • Partner with management to frame and prioritize the issues
  • Focus on business impact and implementation
  • Establish a disciplined, consultative approach through teamwork and collaboration

Operations Research

our approach con t
Our approach (con’t)
  • Build an objective, quantitative structure for analysis
  • Transfer technology to your organization so you can take over the project

Operations Research

our services
Our services
  • Strategic planning
  • Supply chain management
  • Pricing and revenue management
  • Logistics and site location
  • Simulation
  • Marketing research

Operations Research

our services con t
Our services (con’t)
  • Scheduling
  • Portfolio management
  • Inventory analysis
  • Forecasting
  • Sales analysis
  • Auctioning
  • Risk analysis

Operations Research

a few words about operations research
A few words about operations research
  • What is it?
  • Conventional computing isn’t enough
  • Combinatorial explosion
  • The distinct nature of operations research

Operations Research

o r what is it
O.R.: What is It?

Operations research (O.R.) is

the discipline of applying advanced analytical methods to help make better decisions

Operations Research

conventional computing is not enough
Conventional computing is not enough
  • Cannot enumerate alternatives
  • Combinatorial explosion of viable options

Never got outside the box

“Few” alternatives

Operations Research

combinatorial explosion example 1
Combinatorial explosion Example 1
  • Problem: Find shortest path through 10 points
    • Assume a super-powered computer analyzes, quantifies, and compares a million alternatives every second
    • Answer is found in less than one second
  • Now find the shortest path through 20 points
    • Same computer would take over 39,000 years to solve

Operations Research

combinatorial explosion example 2
Combinatorial explosion Example 2
  • Construct a 5 stock portfolio out of 100 possible stocks
    • Evaluate for risk and return using same computer as Example 1
    • Answer found in 1.25 minutes
  • Now diversify to 9 stocks
    • Answer found in 220 days
  • Now diversify to 10 stocks
    • Answer found in 5.5 years

Operations Research

distinct nature of o r
Distinct nature of O.R.
  • Applies leading-edge analysis
  • Can find the best among many choices, in reasonable time
  • Can consider and balance multiple objectives
  • Can help measure, control, and reduce risk

Operations Research

o r success stories
O.R. success stories

Representative cases from the annual INFORMS Edelman Competition

2002: Continental Airlines Survives 9/11

2001: Merrill Lynch Integrated Choice

2001: NBC Optimizes Ad Sales

2000: Ford Motor Prototype Vehicle Testing

1996: Procter & Gamble Supply Chain

1991: American Airlines Revolutionizes Pricing

Operations Research

case 1 continental airlines survives 9 11
Case 1: Continental Airlines Survives 9/11
  • The problem
    • Long before September 11, 2001, Continental asked how it could plan recovery from potential disasters such as massive weather delays

Operations Research

continental airlines con t
Continental Airlines (con’t)
  • Strategic objectives and requirements
    • 1,400 daily flights
    • 5,000 pilots
    • 9,000 flight attendants
    • FAA regulations
    • Union contracts

Operations Research

continental airlines con t21
Continental Airlines (con’t)
  • The O.R. solution
    • Working together with an operations research consulting firm
    • Used an optimization model to generate optimal assignments of pilots and crews following a major disruption of service
    • Solution offers a system-wide view of the disrupted flight schedule and all available crew information

Operations Research

continental airlines con t22
Continental Airlines (con’t)
  • The value
    • Millions of dollars and thousands of hours saved for the airline and its passengers with each major disruption
    • After 9/11, Continental was the first airline to resume normal operations

Operations Research

case 2 merrill lynch integrated choice
Case 2: Merrill Lynch Integrated Choice
  • The problem
    • Deal with the competitive threat of online investment firms
    • Without alienating financial advisors, undervaluing services, or incurring substantial revenue risk

Operations Research

merrill lynch con t
Merrill Lynch (con’t)
  • Objectives and requirements
    • Evaluate new products and pricing options
    • Evaluate options of online vs. traditional advisor-based services

Operations Research

merrill lynch con t25
Merrill Lynch (con’t)
  • The solution
    • Merrill Lynch’s O.R. group simulated client-choice behavior, allowing it to:
      • Evaluate the total revenue at risk
      • Assess the impact of various pricing schedules
      • Analyze the bottom-line impact of introducing different online and offline investment choices

Operations Research

merrill lynch con t26
Merrill Lynch (con’t)
  • The value
    • Introduced two new products garnering $83 billion ($22 billion in new assets) and produced $80 million in incremental revenue
    • Helped management identify and mitigate revenue risk of as much as $1 billion
    • Reassured financial advisors

Operations Research

case 3 nbc optimizes ad sales
Case 3: NBC Optimizes Ad Sales
  • The problem
    • NBC sales staff had to manually develop sales plans for advertisers, a long and laborious process to balance the needs of NBC and its clients
    • The company also sought to improve the pricing of its ad slots as a way of boosting revenue

Operations Research

nbc con t
NBC (con’t)
  • Objectives and requirements
    • Complete intricate sales plans
    • Reduce labor cost
    • Maximize income

Operations Research

nbc con t29
NBC (con’t)
  • The O.R. solution
    • Used optimization models to reduce labor time and
    • Used revenue management to improve pricing of its ad spots, which were viewed as a perishable commodity

Operations Research

nbc con t30
NBC (con’t)
  • The value
    • In their first four years, the systems
      • increased revenues by over $200 million
      • improved sales-force productivity
      • improved customer satisfaction

Operations Research

case 4 ford motor prototype vehicle testing
Case 4: Ford Motor Prototype Vehicle Testing
  • The problem
    • Developing prototypes for new cars and modified products is enormously expensive
    • Sought to reduce costs on these unique, first-of-their-kind creations

Operations Research

ford con t
Ford (con’t)
  • Objectives and requirements
    • Needed to verify the designs of its vehicles and perform all necessary tests
    • Prototypes often sit idle awaiting various tests, so increasing their usage would offer clear benefits

Operations Research

ford con t33
Ford (con’t)
  • The solution
    • Ford and an O.R. consulting firm developed a Prototype Optimization Model (POM) to reduce the number of prototype vehicles
    • The model determined an optimal set of vehicles that can be shared and used to satisfy all testing needs

Operations Research

ford con t34
Ford (con’t)
  • The value
    • Ford reduced annual prototype costs by $250 million

Operations Research

case 5 procter gamble supply chain
Case 5: Procter & Gamble Supply Chain
  • The problem
    • To ensure smart growth, P&G needed to
      • improve its supply chain
      • streamline work processes
      • drive out non-value-added costs
      • eliminate duplication

Operations Research

procter gamble con t
Procter & Gamble (con’t)
  • Objectives and requirements
    • P&G recognized that there were potentially millions of feasible options for its 30 product strategy teams to consider
    • Executives needed sound analytical support to realize P&G’s goal within the tight, one-year deadline

Operations Research

procter gamble con t37
Procter & Gamble (con’t)
  • The solution
    • The P&G O.R. department and an O.R. consulting team created decision-making models and software.
    • Followed a modeling strategy of solving two easier-to-handle sub-problems:
      • Distribution/location
      • Product sourcing

Operations Research

procter gamble con t38
Procter & Gamble (con’t)
  • The value
    • The overall effort saved $200 million a year before tax
    • Allowed P&G to write off $1 billion in assets and transition costs

Operations Research

case 6 american airlines revolutionizes pricing
Case 6: American Airlines Revolutionizes Pricing
  • The problem
    • To compete effectively in a fierce market, the company needed to “sell the right seats to the right customers at the right prices”

Operations Research

american airlines con t
American Airlines (con’t)
  • Objectives and requirements
    • Airline seats are a perishable commodity whose value varies
      • At times of scarcity they’re worth a premium
      • After flight departs, they’re worthless
    • The new system had to develop an approach to pricing while creating software that could accommodate millions of bookings, cancellations, and corrections

Operations Research

american airlines con t41
American Airlines (con’t)
  • The solution
    • The team developed yield management (a.k.a. revenue management) and dynamic pricing
    • The model broke down the problem into three sub-problems:
      • Overbooking
      • Discount allocation
      • Traffic management
    • The forecasting and optimization models were embedded in a large revenue management system that interfaces with the reservation system

Operations Research

american airlines con t42
American Airlines (con’t)
  • The value
    • In 1991, American Airlines estimated a benefit of $1.4 billion over the previous three years
    • Since then, yield management has been adopted by other airlines, hotels, car rentals, and cruises—resulting in billions of dollars in added profits

Operations Research

some important points
Some important points
  • Differences between O.R. and IT
  • Keys to success
  • Conclusion

Operations Research

differences between o r and it
IT

Focuses on data as a corporate resource

Stores, retrieves, formats, displays data

Understands business processes and transactions

O.R.

Helps management select the best decision or set of decisions

Applies analysis to convert data into useful information

Works with management to help gain the deepest insights from analytical results

Is typically embedded in an information system to provide recommended decisions or actions

Differences between O.R. and IT

Operations Research

keys to success
Keys to success
  • Focuses on business impact and implementation
  • Improves decision processes while reducing risk
  • Helps operations become more efficient and effective
  • Establishes a disciplined, consultative approach
  • Transfers technology to your department so you can take over the project
  • Uses the appropriate analytical tools

Operations Research

conclusion
Conclusion
  • Operations research is the discipline of applying advanced analytical methods to help make better decisions
  • We collaborate easily with organizations like yours to achieve major goals
  • We can help you realize powerful benefits in dollars, time, productivity, customer satisfaction, marketshare, and more

Operations Research